Other articles by Gail Marksjarvis:

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Q Is it wise during a down market like we've been in to change my portfolio from 80 percent in stock funds and 20 percent in bond funds to a mixture of 60-40 instead? I've heard that I will lose money forever if I rebalance from a stock fund to a bond fund.

A You've touched on a major misconception. When people are told not to flee stocks, the fear is that they'll move all their money to cash. In that case, it could indeed take them years to make back everything they lost.

But a 60-40 split is not that.

You would hurt yourself if you yanked everything out of stock funds and put it all into an ultrasafe alternative such as a money market fund or savings account, and left it there for many years.

That's because money-market funds and savings accounts earn very little compared to the stock market over long periods of time.

Let me illustrate what people are saying when they tell you not to run away from your stock funds.

We'll go back to 2000 and an awful two-year crash in the stock market. If you had had $10,000 in a stock fund in 2000, you might have had only $5,000 left at the end of 2002. So what if you panicked, pulled the entire amount out of stocks and put it into a money market account?

Then, in 2003, you would have earned only about 3 percent interest, and by the end of the year your $5,000 would have grown into $5,150.

But what if you had controlled your fear in 2002 and left your downtrodden $5,000 in a stock market fund? In 2003 something wonderful happened — as it does at some point after every terrible, scary bear market. The bad times end and the stock market enjoys a bull market.

In 2003, a typical stock fund would have gained about 28.5 percent. So through the good graces of that unpredictable surge in the stock market, your $5,000 would have become $6,425, rather than the mere $5,150 you would have derived in the safe investment. This is why you hear so many people say to stay the course during bad markets. They don't want you to miss the party.

The effect is even greater if you look at it over a long period. The $6,425 invested in a stock fund growing 6 percent a year on average would be worth more than $20,000 after 20 years. But the $5,150 invested in a money market fund earning 3 percent would still be shy of $10,000 after 20 years.

Sometimes people simply can't wait for these types of results. There is no way to tell during a scary stock market when the pain will end and the party will begin. There have been periods when the market has been awful for 10 years. If you are a person who can't stand to wait for the party, putting 60 percent in stocks and 40 percent in bonds is acceptable.

A 60-40 split is a classic portfolio — one that professionals often embrace for pension funds, people in their 50s or cautious people who want to grow money without substantial risks.

Looking back to 2003, you will see that a 60-40 portfolio can still grow nicely. That year, such a portfolio — or what's called a "balanced" approach — would have gained 19.5 percent. That, of course, is not the 28.5 percent in the average stock fund, but it's not bad.

Of course, the best time to gear down your risks in stock funds is before they have declined. But if you learned the last few weeks that you have been taking more risks than you can stomach, pick a time when stocks are climbing and bring your stock exposure down somewhat. A simple way to keep a classic 60-40 mixture in good times and bad is by investing in what's called a balanced fund.

A: If you have a regular tax-deductible IRA, you could tap it to pay for health insurance in some emergencies such as a lengthy period of unemployment. So if you used the federal COBRA provision to buy health insurance from your old employer, or if you bought insurance on your own after losing your job, add up everything you spent. You might be able to avoid the penalties on that money, but you will still owe taxes.

The reason: When you put money into the individual retirement account, you didn't pay taxes on it.

You would have had more flexibility with a Roth IRA. You can withdraw your contributions — but not the interest your contributions earn — at any time, no matter your age.

For people not yet in the bind you are in, I suggest trying to cut back expenses, or taking a temporary job, before tapping IRAs or 401(k)s. Try budgeting tools at Wesabe.com or Mint.com.

Meanwhile, if you think the rules should be eased for people struggling after a layoff, let your U.S. senators and representative know. It is an election year, so ears may be receptive.

On the Money

Gail MarksJarvis